At the BIS Innovation Summit on May 7, JPMorgan’s Onyx CEO Umar Farooq stated that public blockchains can’t handle large transactions.
“I think you almost need something like [a Unified Ledger]. I mean, it’s actually almost a necessity because if you look at […] public blockchain ledgers, they are not fit for purpose for large transactions today.”
The CEO’s remarks responded to the Unified Ledger concept by the Bank of International Settlements (BIS), which supports central bank money flows and digital assets. Farooq emphasized that in case of a $100 million transaction failure, blockchain validators cannot be held responsible. Farooq said:
“Who do I sue? […] You need to get somewhere where people can do trusted transactions between financial institutions with some sort of accountability in the system.”
Despite the CEO’s critique, JPMorgan’s Onyx platform is constructed as a private, permissioned variant of Ethereum, the second-largest public blockchain network. Unlike the public ones, Onyx’s permissioned chain allows institutions to undo transactions. Additionally, Farooq of JPMorgan contended that cryptocurrencies on public blockchains create misleading incentives to attract more users and inflate coin prices. He argued that blockchains, akin to the internet, should be viewed as a public utility.
“We need to get to an evolution point where the technology starts to be seen as a public good versus as a means to enrich.”
Despite facing criticism, traditional financial institutions favor tokenizing assets on public blockchains. According to Celisa Morin, former vice president of platform distribution at Grayscale, BlackRock’s recent move may prompt more traditional finance firms to tokenize assets on public instead of private blockchain.
“I think we see a preference for private chains with JPMorgan’s Onyx. But I do think that this was the narrative a few years back. Now, I think it’s very much the public blockchains.”
Morin cited BlackRock’s $100 million tokenized “BUIDL” fund, launched on Ethereum on March 18. The fund now exceeds $382 million, making it the largest tokenization fund globally, as per Dune data.
Image by Gerd Altmann from Pixabay
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